Option Prices are Singing

Option prices - by incorporating time (expiry) and distance (strike) - give us many more dimensions than a mere flat price like the SPX or a single stock. If the stock market speaks, then the option market sings. It's my strong contention that option prices are singing out loud right now, begging for attention. The market was largely unchanged on the week, but there were some meaningful developments in the price of options – on gold, on crude and on the VIX – that tell us something about an emerging discomfort and perhaps a view that stock prices at all-time highs do not have much margin of safety in this environment. What I highlight in this podcast is that hedging costs can be a function of the market's ability to provide the capital to absorb loss. The Election and a very unsettling geopolitical backdrop make this more challenging.  I hope you find this helpful.

Om Podcasten

The Alpha Exchange is a podcast series launched by Dean Curnutt to explore topics in financial markets, risk management and capital allocation in the alternatives industry. Our in depth discussions with highly established industry professionals seek to uncover the nuanced and complex interactions between economic, monetary, financial, regulatory and geopolitical sources of risk. We aim to learn from the perspective our guests can bring with respect to the history of financial and business cycles, promoting a better understanding among listeners as to how prior periods provide important context to present day dynamics. The “price of risk” is an important topic. Here we engage experts in their assessment of risk premium levels in the context of uncertainty. Is the level of compensation attractive? Because Central Banks have played so important a role in markets post crisis, our discussions sometimes aim to better understand the evolution of monetary policy and the degree to which the real and financial economy will be impacted. An especially important area of focus is on derivative products and how they interact with risk taking and carry dynamics. Our conversations seek to enlighten listeners, for example, as to the factors that promoted the February melt-down of the VIX complex. We do NOT ask our guests for their political opinions. We seek a better understanding of the market impact of regulatory change, election outcomes and events of geopolitical consequence. Our discussions cover markets from a macro perspective with an assessment of risk and opportunity across asset classes. Within equity markets, we may explore the relative attractiveness of sectors but will NOT discuss single stocks.